Name: 5 Ways Rich People Make Money With Debt
Uploaded: 2021-06-23T19:30:35.000Z
Duration: 11 min 8 s
Description: Thousands of YouTube videos with English-Chinese subtitles! Now you can learn to understand native speakers, expand your vocabulary, and improve your pronunciation...

wow, Have you heard the phrase debt is the root of all evils never gets into debt debt slavery.

Transition words & phrases

And that is true to a certain extent because when you're drowning in debt, your life is over.

While you're trying to pay your debts, your debts are not waiting for you.

They are growing day by day since no one learns money for free, there is always an interest.

Despite all of this, the United States has embraced debt.

Consumer debt is almost $15 trillion which brings the average household debt to over $5300.

GDP is a little over $21 trillion, which means the entire economy consists out of that.

That is unpopular opinion because most of the debt we have is bad debt.

You probably have some credit card debts, a car loan and maybe a student debt and you're thinking it will take me decades to pay off all of these debts.

How on earth can that be something good in order to understand how that can be something positive.

Let's take a look at how people with deep pockets still use death to make even more money.

It might sound a bit confusing because why would anyone with a lot of money use debt in the first place.

That is supposed to be used by people who do not have money.

And in this video, you will find out how rich people use that to make even more money.

So give this video a thumbs up and let's get right into it.

No one, most of the trade is based on debt.

It might sound a bit controversial because borrowing money to start the business is a horrible idea and personally I would never do that.

But there are businesses, especially traditional businesses were using debt is your best option.

It's a very common products and there is pretty much always a demand for it ideally.

You would fly to china, find a factory that produces that kind of pen with good quality and the right price.

You would purchase a container of pence, ship them to the U.

But today that's mostly done online through websites like Alibaba.

Unless it's a more complicated products where you have to fly to that factory.

You don't really have to pay for the products to have the product first.

Let me explain how in the past 50 years, china has become the factory of the world, producing literally everything.

Thousands of factories work nonstop to produce everything that the world needs.

And in order to make it easier to sell most of these factories would gladly loan you their products in return That you would pay them sometime in the future.

Of course, they would not learn to strangers.

So you will have to build some kind of trust with them first.

But that's how business has been running for the past 50 years.

Once the client would sell the product in the US.

or any other part of the world, he would pay the factory and borrow more products.

You're basically telling the factory, you know how to produce it.

If I can sell it for anything above this price, that's going to be my profit.

What makes this strategy great is that you're not tying up your own money in this transaction.

That's why selling is one of the greatest skills you can ever master.

Re financing real estate debt is the best kind of debt because it's filled with loopholes.

If you don't have a mortgage, then you're paying extra taxes.

Rich people always have multiple mortgages to be able to get all of those deductions.

Remember every dollar that you're supposed to pay in taxes, but instead You save an extra dollar earned.

So that's another way rich people get richer.

But let me give you a more practical way.

This is how basically rich people get rich in real estate.

But if we are going to be honest, that's peanuts.

Of course you can get a mortgage up to $800,000 since you have to make a 20% down payment.

But here is the secret, let's say you find a property that cost half a million dollars.

It's in a bad condition and needs some or maybe a lot of renovation.

You had to a bank and get a mortgage by making a 20% down payment.

Let's say you're going to spend around 10% of the total cost of the house to renovate it.

But this time to refinance your mortgage when you got your first mortgage, the value of that property was just half a million dollars because it was in such a bad condition that no one wanted to live there.

But since you have renovated it now, there are people who want to rent it out.

So the market value of that property, let's say rises to $700,000.

Like the first time, let's say you're going to get an 80% mortgage, but 80% out of $700,000 is $560,000.

$400,000 out of that money is going to go to your first bank that gave you the first mortgage.

And let's deduct another $50,000 that you spend on the renovation.

And you're going to be left with an extra profit of $110,000.

You made $110,000 using debt and you're left with a property that you can rent out to build equity and generate passive income.

You're going to avoid paying taxes because you have a mortgage.

This is a very common practice among real estate investors.

I will leave that for you to answer in the comments section below number three hedge funds, hedge funds are made by the rich for the rich to make rich people richer and they usually use unpopular strategies.

Mortal people like me and you, we make our best efforts to predict which companies are going to grow and rise in value and invest the money we work so hard to earn in hopes for these companies to grow.

But hedge funds often use a completely opposite strategy.

They try to make money when companies fall or go bankrupt as it was with the case of Gamestop, although in that case the Internet challenge hedge funds and push them to lose over $13 billion.

But how do you hedge funds make money with debt?

Let's say you expect a certain stock to decline like facebook because you know that Apple, who produces the most popular smartphone, will announce next week that they will no longer let apps to track you like facebook or instagram track your online activity and make privacy their first priority, which will greatly damage facebook's business model.

So you pick up your phone and call your broker to borrow from him a single facebook stock that cost, let's say $100 and instantly sell it in the open market for $100.

Congrats now you have $100 in your pocket, but you steal all your broker one facebook stock, Let's say you're right.

And next week Facebook stock price drops to $70.

Use that $100 to buy one- Facebook stock for $70 since the price dropped and return it to your broker and pocket.

The difference congrats you've made $30 out of a full of a stock.

It sounds simple in theory, but it's extremely difficult and risky in practice.

What if the price doubles overnight, you still have to return that single facebook stock, your broker and pay interest for borrowing that stock.

Now you have to buy that stock back for $200 to return it to your broker when you buy a stock and try to sell it.

The maximum that you can lose is the amount you invested in.

But not in the case of short inc if the price keeps rising, your losses keep rising theoretically, you can make unlimited losses, since theoretically the stock price can rise indefinitely.

But if you have 100 analyst working for you, you can make a fortune using the strategy number four for X.